Indigenous Clean Energy Surges on Rising Demand for Renewable Power

Indigenous communities across Canada are taking their place at the centre of the rapid shift to clean, decentralized, renewable energy. And project finance that respects communities’ values and supports their economic development goals is a key contributor to their success. 

In recent years, the Six Nations of the Grand River Development Corporation (SNGRDC) in Ohsweken, southwest of Hamilton, Ontario, has emerged as one of the leading developers of renewable energy and, now, energy storage projects. When Ontario’s Independent Energy System Operator (IESO) issued contracts for 10 new battery storage projects in May, SNGRDC had a stake in three of them. 

CEO Matt Jamieson , a member of the Tuscarora Nation, says the Development Corporation’s successful track record with past renewable energy investments has brought it to the attention of potential project partners—and positioned the community to set expectations for the way those partnerships will be structured. 

Strategic and Selective 

“Unfortunately, there are a lot of companies out there that want to break into the energy storage business, and we can’t be the guinea pigs. We must be strategic and selective,” he says. “Fortunately, because of our experience and reputation, we’re in a position to require full disclosure of their financial model and strategy, why they think they’ll assemble a winning bid, and what role we’ll play.” 

Far from sitting on the sidelines as a passive investor, SNGRDC sets the expectation that it will “play a very active role in the development cycle,” ensuring close attention to archaeological considerations on the site, environmental protection, species at risk, and more. Projects must also factor in the community’s strategy for diversifying its position in renewable energy projects, with moves into construction, operations, and real estate management.

Terri Lynn Morrison Director of Engagement at Saskatoon-based Creative Fire, says developers can’t expect local consent for a project that doesn’t reflect a community’s needs and priorities. 

“If there’s a potential impact on water, or forests, or animals that a community hunts as a food source, there’s going to be resistance,” says Morrison, a member of the Listuguj Mi'gmaq First Nation.

"One of the keyways to bring Indigenous communities along on this journey is to involve them at a very early stage in the process to help mitigate any of those impacts, share their knowledge about the land and territory, so the developer can create a project that minimizes any potential impact on Indigenous rights and title.” 

That happens “through conversation at the onset, when the project is just an idea,” she adds, “rather than spending the money and doing the feasibility study, or an environmental impact assessment, presenting them with your project, risking that they say it’s just three kilometers north of their traplines and you have to reconsider everything.” 

While some developers just follow government policy and only engage to the extent they’re required to, Morrison said the successful projects are the ones that are built from the ground up with Indigenous community participation. 

Capacity and Financing 

In addition to an equity stake, Jamieson says any deal with SNGRDC must include capacity funding to support independent financial modelling and legal advice, as well as an equity bridge loan facility to cover the fragile period in any project from financial close to the beginning of operations.  

We’re very cautious about deploying risk dollars because the bottom line hits the community,” he explains. If a partner balks at the bridge loan, “that makes me question whether they believe in the financials. It’s really an acid test for their ability to produce cash flow.” 

The New Math 

When Vancity Community Investment Bank hosted a webinar on Indigenous clean energy in 2022, Steve Parsons, General Manager of the Eskasoni First Nation Corporate Division in Nova Scotia, said 51/49 is the new math of Indigenous clean energy partnerships. 

“Our joint venture strategy is not complicated,” Parsons said at the time. “The projects are all 51%/49%,” with the community holding majority ownership. 

“We don’t run the company. That’s why we take on a partner. But we always protect the interests of Eskasoni first and foremost.” 

Jamieson says Six Nations would ultimately prefer a 100% stake in a project, sets 25% as a minimum threshold, and aims for 51%. But the details can get more complicated as the community’s ownership share rises. With bigger chunks of equity, he explains, a community can face “tremendous risk” if a project misses its production target by even 5%, or if the financial model falls short in some other way. “So we’re very calculated in the way we make those investment decisions.” 

Morrison agrees that a 51% stake for the community “gives comfort that the project will progress as agreed to, that the community will be able to raise a hand and have a say.” At the same time, “a lot of the spirit and intent of partnerships with Indigenous communities is founded on consensus-building. We don’t take a traditional approach to business, like the number of votes and how we’re going to mediate a problem.” 

She says that’s one of the biggest differences when an outside investor or financial institution partners with an Indigenous community. “Ideally, we don’t have to flex the 51%. We make decisions based on consensus, so that everybody in the group is satisfied with what has to be done.” 

Primed for Takeoff 

James Jenkins , Executive Director of Indigenous Clean Energy, says renewable energy projects in Indigenous communities have been primed for takeoff for some time. Almost every jurisdiction in Canada has set requirements for Indigenous participation, and the Canada Infrastructure Bank has been “in the right place at the right time” to help build momentum. 

"Conservatively, just about 20% of the total generation infrastructure of Canada has some kind of Indigenous economic participation, whether that’s ownership, co-ownership, or a defined economic benefit agreement,” says Jenkins, a member of the Walpole Island First Nation. 

“We see it as a key part of the puzzle in getting generation to market: how do we ensure that Indigenous communities have the capacity to participate at that level as the number of projects continues to grow?” 

With the economy rapidly shifting from fossil fuels to clean electricity, that question is being answered in real time. Power utilities are “looking at recent history and some of the conditions” for new generation projects, with all signs pointing to a flurry of new activity in the years ahead. 

Jenkins agrees that project financing is most challenging during the pre-construction and construction phases of a project when traditional lenders are more hesitant to lend a hand. Those old, entrenched practices point to the value of working with a financial partner like Vancity Community Investment Bank, where a mandate for impact translates into greater flexibility and willingness to fund innovative, community-based projects at an earlier stage of development. 

“Crown corporations can help a great deal at that initial stage when partners are looking for non-traditional forms of capital, and some Indigenous capital firms have started to appear, as well,” he says. A successful project also requires a “very savvy regulatory advisor to guide the Indigenous partner and come up with a plan,” ensuring the community benefits over the longer term. 

A Trusted Financial Partner 

Successful projects also depend on a financial institution that appreciates the growing expertise and experience in Indigenous communities and understands the benefits that each party brings to the table. “There can still be bias among financial institutions, although that’s starting to change,” Jenkins says. “It’s important that institutions are aware that Indigenous communities are already major proponents of big energy projects.”  

Trish Nixon , Managing Director of Climate Finance at VCIB shares, “supporting Indigenous participation and ownership in the low carbon transition is a key pillar of our strategy as an impact bank. This compels us to work hard with partners to understand unique considerations and structure the right financing solutions to help meet that objective.”   

Morrison says she’s beginning to see past projects expand and bring more revenue back to communities, with Indigenous participation also extending into larger, grid-scale developments as well as local investments. That makes it more important than ever for communities to work with trusted financial partners. 

“Any institution needs to be intentional about its relationships with Indigenous communities and be consistent in the way they do outreach with communities,” she says. Building strong relationships also extends to an institution’s own in-house operations. 

“The models that exist around reconciliation action plans really take a holistic approach to how a company engages and looks at all the different parts of the business,” including recruitment, hiring, and how employees are supported and encouraged to advance in the company, she explains. 

“Some people only speak their Indigenous language, so what are financial institutions doing to ensure accessibility? There’s a long list of things to be done, not just looking at it as a one-off approach, but in terms of how the entire organization is working and showing up in that space.” 

Read more about VCIB's climate finance projects here.